Two Developers Take Different Approach In a Tough Environment
By Caitlin Jones
3 min read
Tax Credit Advisor, January 2010: Low-income housing tax credit (LIHTC) developers Robert Greer and Matthew Schwartz are taking different paths in today’s tough market.
Greer, of The Michaels Organization, a multi-unit real estate firm that has developed LIHTC and HOPE VI projects in 29 states, says the company is submitting lots of housing credit applications and is successfully garnering equity directly from investors.
Schwartz, principal of The Domain Companies, New York City, is just doing preliminary planning for some potential future LIHTC projects, and developing other kinds of deals while he waits for the equity market to recover.
The Michaels Organization, based in Marlton, N.J., has a housing development company, property management firm, asset management company, military housing outfit, construction company, and relatively new tax credit syndication entity. “We are selling all of our credits directly to [regional and local] banks,” said Greer. “We’re getting pricing in the high 70s, which makes these deals happen.”
Greer’s company, though, is making further adjustments. Because of its many proposed LIHTC projects and the extra equity needed, the company is beginning to reach out as well to national banks for direct investments. Greer said his company is also beginning to other kinds of additional financing sources for projects that “we’ve never used before,” such as green building funds and various state-sponsored programs.
Greer said the company is hiring, adding to its syndication, asset management, and construction staff, and bringing in more developers.
Finally, one of the company’s biggest activities today is purchasing portfolios of general partner (GP) interests from other LIHTC developers. “We’re buying many different companies, taking over their portfolio as a GP, taking the management business, and increasing our portfolio,” says Greer.
The Domain Companies, by contrast, doesn’t currently have any LIHTC applications in the hopper, and is just planning for some possible future projects. “We have a number of projects that we’re working on putting together, but we’re not at the application point,” said Schwartz.
The company, which specializes in developing housing projects with a mix of affordable and market-rate apartments, closed its last batch of LIHTC projects more than a year ago, before credit pricing tumbled. Schwartz said land prices and construction costs in New York City haven’t fallen to the point where new deals are viable.
The Domain Companies, though, is developing and financing other kinds of projects using the federal new markets tax credit (NMTC). In November, it closed and began construction of an NMTC-assisted neighborhood strip retail center in New Orleans. This will support a $55 million mixed-use NMTC project across the street that was previously completed by The Domain Companies. This project, called Crescent Club, has 228 mixed-income apartments plus some retail space. Leveraged loan funds came from Capital One and the local redevelopment authority. Capital One is also the NMTC investor.
